Moody’s puts RBS on review for downgrade as Osborne weighs split

By Gavin FinchBloomberg News

Royal Bank of Scotland Group PLC’s credit rating was put on review for downgrade by Moody’s Investors Service, which cited the government’s decision to consider a break-up of the bailed-out British lender.

LONDON - Royal Bank of Scotland Group PLC’s credit rating was put on review for downgrade by Moody’s Investors Service, which cited the government’s decision to consider a break-up of the bailed-out British lender.

Moody’s put Royal Bank of Scotland Group’s long-term ratings and Royal Bank of Scotland Plc’s A3 long-term debt and deposit ratings on review, according to a statement today.

The move “reflects the further uncertainty for bondholders resulting from the U.K. government’s recent announcement that it is examining the merit of a possible breakup of RBS and how this could be achieved,” Moody’s said in a statement today.

Chancellor of the Exchequer George Osborne said last month the U.K. government will investigate the case for breaking up RBS and hiving off its toxic assets into a “bad bank.” Splitting the bank could trigger losses, especially for junior bondholders, as assets are sold and a smaller bank’s profitability would be lower, Moody’s said.

The ratings company said it expects to complete its review after the government decides what to do with RBS, a decision slated for the autumn.

RBS, which is 81 percent state-owned, is weighed down by too many poor assets, Osborne said. The Edinburgh-based lender received a 45.5 billion-pound ($68 billion) bailout in 2008 and 2009, the costliest in banking history.

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